The Serious Fraud Office obtained search warrants unlawfully during its
investigation into property magnates Vincent and Robert Tchenguiz, the High
Court ruled on Tuesday.

Two of the country's most senior judges declared the crime-fighting body obtained the warrants "by misrepresentation and non-disclosure" to the appropriate judge.

Lord justice Thomas found the SFO would not have obtained the search and arrest warrants used against the brothers in March last year if the evidence had been "properly presented".

A court hearing to discuss the details of the case, which is expected to leave the SFO facing a large bill for damages, will be held this afternoon.

The Tchenguiz brothers were under investigation as part of a corruption and fraud investigation into the UK affairs of Icelandic bank Kaupthing prior to its collapse in 2008. Both denied any wrongdoing from the outset.

The case has led to repeated criticism of the SFO, its funding and its operation.

In May during a judicial review brought by the Iranian-born brothers, David Green, the new SFO director, said he was undertaking an urgent review of the investigation into Vincent Tchenguiz following a series of basic errors.

The SFO was accused of “sheer incompetence” by Lord Justice Thomas during the judicial review process for blunders such as losing key documents and overlooking financial reports.

The SFO admitted that search warrants for dawn raids on Vincent Tchenguiz’s home and offices in London’s Park Lane in March last year contained fatal flaws. The SFO also botched attempts to delay the return of documents it seized from Vincent Tchenguiz.

The brothers have argued that the investigation has jeopardised their relationships with lenders and inflicted huge losses on them. Vincent Tchenguiz has gone as far as to write to the SFO threatening to launch a £100m claim for damages flowing from his arrest.